Carter Holt target's shares surge

By PAM GRAHAM

The share price of Carter Holt Harvey's takeover target in Australia, listed packaging company Wadepack, closed up 20 per cent yesterday.

The A$2.68 close was just below the Carter Holt cash bid of A$2.70.

New Zealand analysts say the A$85 million ($93 million) bid is at a full price - as it is probably needed to get the support of Wadepack's board and a 40 per cent shareholder, Ashod Nassibian, who is also managing director.

The price is 7.9 times Wadepack's operating earnings in 2003.

Carter Holt sold its Australian tissue business this year for 8.4 times earnings.

The bid is subject to regulatory approvals, 90 per cent of shareholders accepting and other standard clauses.

It would increase Carter Holt's share of the Australian cartonboard market from 18 per cent to just over 30 per cent. That would rank it alongside the 33 per cent of the biggest player, Amcor, said Rhys Jones, Carter Holt's chief operating officer of pulp, paper and packaging.

The marriage of Carter Holt's cartonboard business with Wadepack had long been speculated on, but Jones said Carter Holt only began the formal process in the past two weeks.

The businesses fitted well together because Wadepack was big in pharmaceuticals and cosmetics packaging, unlike Carter Holt's existing business, he said.

Wadepack was already a customer of Carter Holt's Whakatane pulp and paper mill.

Wadepack cartonboard is used for wrapping six packs of beer, fish fingers and products in chemist shops - and does not include corrugated packaging.

Jones said Nassibian "is totally supportive".

A company associated with him had so far agreed to sell 19.9 per cent of Wadepack.

Carter Holt's bidder statement will be sent out in December and there will be a target statement from Wadepack. It is not clear if there will be an attached independent report.

Australian investment bank Carnegie, Wylie is advising Carter Holt.

Analysts said Wadepack's shares were tightly held and the bid was unlikely to be blocked by hedge funds.

Jones said the deal stacked up on Carter Holt's rate of return analysis and there would be synergies from putting the assets together.

He declined to put numbers on savings or say if if there would be a rationalisation of sites.

Carter Holt has cartonboard assets in Brisbane, Sydney, Adelaide and Melbourne.

Wadepack is in New South Wales and Victoria.

New Zealand's largest forestry company already has $1.4 billion of assets in Australia, mostly bought cheap and privately.

At home, Carter Holt's shares closed down 2c at $2.15.